8/23/2006 @ 6:00AM

If Pigs Had Wings

Albert Einstein once defined insanity as “doing the same thing over and over again and expecting different results.” The only thing more insane: starting a new car company. The challenges–financial, engineering, manufacturing, marketing, regulatory–are almost insurmountable. Remember Preston Tucker, or John DeLorean?

But of course, someone is trying again. And the effort is not only to start a new car company, but effectively to start a new car category–a viable electric car. The name to remember this time is Martin Eberhard. But this time around, the legacy could be very different.

The new car company is called Tesla Motors (named in honor of legendary electrical engineer Nikola Tesla). Everything about it is new: the way the company is being financed, the way the car performs, the way it is entering the market.

Think about electric cars. Up to this point, they’ve been considered the intersection of low performance, short driving range and ugliness, inside and out. To call them golf carts on steroids would be kind.

But what if there were an electric car that looked like a hot sports car–and performed like one, with acceleration from zero to 60 in four seconds? What if the car had a driving range of 250 miles, easily enough to cover most people’s daily driving needs. Sound like a pipe dream? Well, this pipe dream will be coming to a road near you within the year.

Eberhard, Tesla’s CEO, is equal parts entrepreneur, ecological dreamer and engineering buff. His favorite topic is how the Tesla Roadster is more efficient, from original fuel source to wheels, than a car based on any other technology–hybrids, hydrogen or ethanol–none of which promises more than 70% efficiency. Tesla’s technology achieves 86% efficiency.

The first hundred places in line for Tesla Roadsters were pre-sold in less than three weeks, but with only two seats and a price tag of $80,000 to $100,000, Tesla’s Roadster is a car most can only dream of. That’s where the marketing story gets interesting. Within the next two to three years, Eberhard plans to succeed where Tucker failed 60 years ago: to launch a sedan that would serve as a viable second car for America’s mass-affluent.

As Mike Harrigan, Tesla’s vice president for customer service and support, puts it, “You’re much better off coming into the market at the high end, with low volume and high unit margin, and then working your way down-market. Going up-market is much harder.” To help prove his point, Harrigan cites the Volkswagen Phaeton. (He calls it a “spectacular disaster.”)

Tesla Motors has no plan to advertise–at least not in the classical sense. Rather, the company’s marketing strategy will rely on publicity (a high-performance electric car is definitely news), events and fairs (test drives are critical for a performance-based strategy), and viral marketing (environmentalists, and hopefully car buffs, will love it).

Launching with a sports car is also a great marketing tactic: sports cars get more attention than any other type of car; they attract car influencers; and an electrical sports car is, by definition, attention-grabbing.

Add it all up and you find that, unlike Tucker or DeLorean, the Eberhard venture represents a radical departure from automotive conventions at almost every turn. That was a critical part of Tesla Motors’ strategy. As Eberhard puts it: “To be successful, we needed to change the way people think about electric cars. Incrementalism was not an option.”

With gasoline at $3 a gallon and climbing, geopolitics continually threatening to roil the markets, and environmentalism poised to become a more mainstream issue, Tesla could be driving into a perfect storm. Of course, storms can be treacherous, and there’s plenty that can go wrong. But by doing almost everything differently than it’s been done before, Tesla Motors just might be ushering in a new era of automotive sanity.

Marc E. Babej and Tim Pollak are partners at Reason Inc, a marketing-strategy consulting firm that works with clients in a range of categories, including media and entertainment, financial and professional services, packaged goods and the public sector.